Jana Stacy v. ASI Select Insurance Corporation ( 2024 )

IN THE
Court of Appeals of Indiana
FILED
Jana Stacy, Aug 26 2024, 9:19 am
CLERK
Appellant/Cross-Appellee-Plaintiff Indiana Supreme Court
Court of Appeals
and Tax Court
v.
ASI Select Insurance Corp., and United Dynamics, Inc.,
Appellees/Cross-Appellants-Defendants
August 26, 2024
Court of Appeals Case No.
23A-CT-2529
Appeal from the Floyd Circuit Court
The Honorable Justin B. Brown, Judge
Trial Court Cause No.
22C01-2102-CT-281
Opinion by Judge Riley
Judges Kenworthy and Felix concur.
Court of Appeals of Indiana | Opinion 23A-CT-2529 | August 26, 2024 Page 1 of 26
Riley, Judge.
STATEMENT OF THE CASE
[1] In this consolidated appeal, Appellant/Cross-Appellee – Plaintiff, Jana Stacy
(Stacy), appeals the trial court’s summary judgment in favor of Appellee –
Defendant, ASI Select Insurance Corp. (ASI), on Stacy’s breach of contract
claim. Additionally, on interlocutory appeal, Appellee/Cross-Appellant –
Defendant, United Dynamics, Inc. (UDI), appeals the trial court’s denial of its
motion for summary judgment, which concluded that there is a genuine issue of
material fact that UDI’s work was negligently completed.
[2] We affirm in part and reverse in part.
ISSUES
[3] In her appeal against ASI, Stacy presents this court with two issues, one of
which we find dispositive and which we restate as follows:
Whether a genuine issue of material fact exists as to whether
Stacy failed to timely notify ASI of the damage resulting from
UDI’s work; and
[4] In its interlocutory appeal, UDI presents this court with four issues, one of
which we find dispositive and restate as:
Whether the trial court erred, as a matter of law, by concluding
that the relationship between UDI and Stacy should have been
governed by the Indiana Home Improvement Contract Act
(HICA) and not by the foreseeability doctrine as clarified by our
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Indiana Supreme Court’s holding in U.S. Automatic Sprinkler
Corporation v. Erie Insurance Exchange, 204 N.E.3d 215 (Ind. 2023).
FACTS AND PROCEDURAL HISTORY
[5] In March 2019, Stacy purchased a home located at 2412 Stover Drive, New
Albany, Indiana. Shortly after moving into the residence, Stacy noticed
drainage issues in the bathtub, with water draining from the bathtub flowing
back into the residence. Stacy hired Greenwell Plumbing, Inc. (Greenwell) to
address the issue. After running a camera down the drain, Greenwell
discovered that a collapsed sewer line was the cause of the backup. Greenwell
informed Stacy of the collapse and Stacy retained Greenwell to repair the
collapsed line.
[6] On May 15, 2019, two Greenwell employees arrived at the residence with a
backhoe to assist in the repair of the damaged sewer line. They located the
collapsed portion of the sewer line with a camera, dug to the top of the line with
the backhoe, and then dug the remainder of the dirt by hand. Meanwhile Stacy
was in the basement of the residence unpacking boxes when she heard two
“booms,” which she attributed to Greenwell’s backhoe hitting the residence.
(Appellant’s App. Vol. II, p. 190). However, both employees later informed
Jason Thompson (Thompson), Greenwell’s general manager of services, that
the backhoe never struck the residence.
[7] “Six weeks” after Greenwell completed its repair work at the residence, Stacy
noticed a crack in the residence’s exterior brick work and the foundation
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moving inwards. (Appellant’s App. Vol. II, p. 190). She contacted Thompson
and claimed the crack resulted from Greenwell’s employees hitting the
residence with the backhoe. In September 2019, Thompson visited the
residence to survey the alleged damage. Despite acknowledging that he did not
notice any indication that the damage had been caused by a backhoe, as a
gesture of goodwill, Thompson offered to retain UDI to repair the damage to
the exterior and the foundation of the residence. In exchange for Greenwell
retaining UDI to repair the damage for an amount of $4,800, Stacy executed a
Standard General Release (Release) in which she released any current or future
claim against Greenwell for its work at the residence in exchange for Greenwell
paying UDI to repair the damage caused on May 15, 2019. Contained within
this Release was the following provision:
The Customer [Stacy] agrees to release, hold harmless and
indemnify the Company [Greenwell] and its affiliates and each of
its respective agents, attorneys, employees, directors and officers
and the successors, assigns, heirs, executors, administrators and
legal representative of each of the foregoing from and against any
and all liabilities, action, causes of action, claims, rights
obligations charges, damages, costs, attorney’s fees, suits, and
demands of any and every kind, nature and character, whether
known or unknown, fixed or contingent, now existing or later
developing that arise out of or relate to the actions or inactions of
the Company.
(Appellant’s App. Vol. III, p. 158).
[8] During its repair work on Stacy’s residence, UDI installed four steel piers to
stabilize the home. Stacy claimed UDI incorrectly performed the piering work
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and as a result damaged the drywall in the basement, the foundation of the west
wall, the exterior bricks, and caused ceiling cracks. UDI completed its work at
the residence on October 2, 2019. That same day, Stacy informed ASI, her
homeowner’s insurance company, of the damage to her home. After receiving
notification of the claim, ASI retained Tim Lee (Lee), a structural engineer with
U.S. Forensics, to assess the damage to the residence. After inspection, Lee
concluded that “the sewer construction work resulted in mortar joint cracks and
separations in the concrete masonry unit foundation, additional separation in
the west concrete foundation wall, cracks and displacements in the mortar
joints of the brick veneer, and cracks in the interior walls and ceilings
coverings.” (Appellant’s App. Vol. III, p. 192). He also found that “the cracks
in the walls and ceiling of the building were recent and were the result of repairs
to the CMU crawlspace foundation along the south side of the building.”
(Appellant’s App. Vol. III, p. 192). Based on these conclusions, Lee further
clarified that the “damage caused by the excavation work was not the result of
an impact by” the backhoe. (Appellant’s App. Vol. III, p. 193).
[9] On March 16, 2020, ASI denied Stacy’s claim after finding that the cracks in
the walls and ceilings were due to repair work to the foundation and that faulty,
inadequate, or defective workmanship was not covered under the Policy. ASI
also specifically noted that “separation in the west concrete foundation wall,
cracks and displacements in the mortar joints of the brick veneer, and cracks in
the interior walls and ceiling coverings and cracks in the walls and ceilings were
caused by the repair to the CMU foundation performed by [UDI] following the
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sewer excavation.” (Appellant’s App. Vol. IV, p. 56). In its letter, ASI reserved
the right to deny coverage on other grounds that may arise.
[10] On February 26, 2021, Stacy filed a Complaint, alleging claims of negligent
workmanship against Greenwell and UDI, claims for breach of contract against
ASI and Greenwell, and a vicarious liability claim against Greenwell. In
August 2021, based on the terms of the Release, Stacy dismissed her claims
against Greenwell. ASI’s Response to Stacy’s Complaint asserted in its
Affirmative Defenses, among others, that Stacy had failed to provide timely
notice of her claim and that her claim was excluded under the Policy to the
extent that the claim was the result of faulty, inadequate or defective design,
specifications, or workmanship. During discovery, Stacy answered ASI’s
interrogatories by repeatedly asserting that “[UDI] was hired by Greenwell to
repair the damage, and they made it worse.” (Appellant’s App. Vol. III, p. 161,
see also in similar wording at pp. 164-65, 166).
[11] On April 7, 2023, ASI moved for summary judgment, filing a memorandum in
support and designation of evidence and contending that Stacy’s late notice and
her release of Greenwell from liability before giving notice of the claim to ASI
were material breaches of the Policy such that ASI did not have a duty to
provide coverage for the damages under the Policy’s provisions. Alternatively,
ASI asserted that even if there was an issue of material fact as to Stacy’s breach
of the Policy, Stacy’s own pleadings against Greenwell and UDI with claims of
negligent workmanship against both contractors amounted to an admission that
the Policy did not provide coverage. Later that same month, on April 28, 2023,
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UDI filed its motion for summary judgment, together with a memorandum in
support and designation of evidence. In its memorandum, UDI advanced four
grounds to grant its motion. First, UDI alleged that it did not owe a duty
because Stacy was not in privity of contract with UDI and only property
damage had been alleged. Second, UDI contended that the economic loss
doctrine precluded Stacy from recovering under a tort theory. Third, in the
event UDI owed Stacy a duty, UDI did not commit a breach of that duty
because it performed the work correctly. Lastly, Greenwell had released UDI
from liability for the damages now claimed by Stacy. On August 1, 2023, Stacy
filed her responses in opposition to both ASI’s and UDI’s motions for summary
judgment.
[12] On September 28, 2023, the trial court issued its Order granting summary
judgment to ASI, while denying UDI’s motion for summary judgment. In its
Order, the trial court concluded that there was no genuine issue of material fact
that Stacy had released Greenwell from liability prior to reporting her claim to
ASI thereby destroying ASI’s subrogation rights and that Stacy had failed to
provide ASI with timely notice of her claim. In denying UDI’s motion, the trial
court noted that a genuine issue of material fact remained as to whether UDI’s
work was negligently performed. On October 10, 2023, the trial court entered
final judgment in ASI’s favor pursuant to Indiana Trial Rule 54(B).
[13] On October 17, 2023, UDI filed its motion to correct error, motion for
certification of order, and motion to enlarge expert disclosure deadline. After a
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hearing 1, the trial court denied the motion to correct error. Reaffirming its
previous holding on UDI’s negligent workmanship, the trial court addressed
UDI’s other three arguments in detail. The court first concluded that because
Stacy was not a party to the contract between UDI and Greenwell, the court
declined to find that Stacy was bound by the exculpatory clause of the UDI-
Greenwell contract. Second, because Stacy not only characterized her claim as
negligent workmanship, but at “oral arguments, Stacy’s counsel articulated that
it was a claim for breach of contract,” UDI’s argument that Stacy’s claim is
precluded by the economic loss doctrine failed. (UDI’s App. Vol. II, p. 25).
Third, the trial court found that because UDI failed to contract with Stacy as
mandated under the HICA which requires a real property improvement
supplier to provide a contract to the consumer prior to commencing the work,
UDI could not circumvent this requirement by contracting with Greenwell and
not Stacy. Even though the trial court denied UDI’s motion to correct error, it
granted certification of its September 28, 2023 Order for interlocutory appeal.
[14] On January 11, 2024, UDI filed its motion for interlocutory appeal, which this
court granted on February 14, 2024. That same day, we consolidated Stacy’s
already pending appeal against ASI with UDI’s interlocutory appeal.
[15] Additional facts will be provided if necessary.
1
The parties did not provide this court with a transcript of the summary judgment hearing or the hearing on
UDI’s motion to correct error.
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DISCUSSION AND DECISION
I. Standard of Review
[16] Stacy challenges the trial court’s grant of summary judgment to ASI, while UDI
disputes the trial court’s denial of its motion for summary judgment. “The
purpose of summary judgment is to terminate litigation about which there can
be no factual dispute and which can be determined as a matter of law.” Lamb v.
Mid Ind. Serv. Co., 19 N.E.3d 792, 793 (Ind. Ct. App. 2014). “The party moving
for summary judgment has the burden of making a prima facie showing that
there is no genuine issue of material fact and that it is entitled to judgment as a
matter of law.” Mint Mgmt., LLC v. City of Richmond, 69 N.E.3d 561, 564 (Ind.
Ct. App. 2017); Ind. Trial Rule 56(C). Summary judgment is a “high bar” for
the moving party to clear in Indiana. Hughley v. State, 15 N.E.3d 1000, 1004
(Ind. 2014). If “the moving party satisfies this burden through evidence
designated to the trial court, the non-moving party may not rest on its
pleadings, but must designate specific facts demonstrating the existence of a
genuine issue for trial.” Biedron v. Anonymous Physician 1, 106 N.E.3d 1079,
1089 (Ind. Ct. App. 2018) (quoting Broadbent v. Fifth Third Bank, 59 N.E.3d 305,
311 (Ind. Ct. App. 2016), trans. denied), trans. denied. “A fact is material if its
resolution would affect the outcome of the case, and an issue is genuine if a trier
of fact is required to resolve the parties’ differing accounts of the truth, or if the
undisputed material facts support conflicting reasonable inferences.” Williams
v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (citation and quotation marks
omitted).
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[17] We review a court’s ruling on a summary judgment motion de novo, applying
the same standard as the trial court. Hughley, 15 N.E.3d at 1003. “In
conducting our review, we consider only those matters that were designated to
the trial court during the summary judgment stage.” Lowrey v. SCI Funeral
Servs., Inc., 163 N.E.3d 857, 860 (Ind. Ct. App. 2021), trans. denied. “In
determining whether issues of material fact exist, we neither reweigh evidence
nor judge witness credibility [but] accept as true those facts established by the
designated evidence favoring the non-moving party.” Id. (citations omitted).
“Any doubts as to any facts or inferences to be drawn from those facts must be
resolved in favor of the nonmoving party.” Denson v. Est. of Dillard, 116 N.E.3d
535, 539 (Ind. Ct. App. 2018). However, “[m]ere speculation is insufficient to
create a genuine issue of material fact to defeat summary judgment.” Biedron,
106 N.E.3d at 1089. In the summary judgment context, we are not bound by
the trial court’s findings of fact and conclusions thereon, but they aid our review
by providing the reasons for the trial court’s decision. Howard Cnty. Sheriff's
Dep’t & Howard Cnty. 911 Commc’ns v. Duke, 172 N.E.3d 1265, 1270 (Ind. Ct.
App. 2021), trans. denied. The party that lost in the trial court bears the burden
of persuading us that the trial court erred. Biedron, 106 N.E.3d at 1089.
II. ASI’s Summary Judgment
[18] The trial court entered summary judgment in favor of ASI based on two prongs:
(1) Stacy’s late notice of the potentially insured claim prejudiced ASI and (2) by
signing the Release, Stacy destroyed ASI’s subrogation rights even before she
notified the insurance company of the damage to the residence.
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Late Notice
[19] The duty to notify an insurance company of potential liability is a condition
precedent to the insurer’s liability to its insured. Shelter Mut. Ins. Co. v. Barron,
615 N.E.2d 503, 507 (Ind. Ct. App. 1993), trans. denied. As such, “[n]otice is a
threshold requirement which must be met before an insurer is even aware that a
controversy or matter exists which requires the cooperation of the insured.”
Motorist Mutual Insurance Co. v. Johnson, 218 N.E.2d 712, 717 (Ind. Ct. App.
1966). The notice requirement is “material, and of the essence of the contract.”
London Guarantee & Accident Co. v. Siwy, 66 N.E. 481, 482 (Ind. Ct. App. 1903).
The Indiana Supreme Court stated in Miller v. Dilts, 463 N.E.2d 257, 265 (Ind.
1984):
The requirement of prompt notice gives the insurer an
opportunity to make a timely and adequate investigation of all
the circumstances surrounding the accident or loss. This
adequate investigation is often frustrated by a delayed notice.
Prejudice to the insurance company’s ability to prepare an
adequate defense can therefore be presumed by an unreasonable
delay in notifying the company about the accident or about the
filing of the lawsuit.
“The presumption of prejudice means that if the delay in giving the required
notice is unreasonable, the burden falls on the insured to produce evidence that
prejudice did not actually occur in the particular situation.” Ind. Farmers Mut.
Ins. Co. v. North Vernon Drop Forge, Inc., 917 N.E.2d 1258, 1274 (Ind. Ct. App.
2009) (citing Erie Ins. Exch. v. Stephenson, 674 N.E.2d 607, 612 (Ind. Ct. App.
1996)). Thus, in a summary judgment action, it is incumbent upon the alleged-
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insured to set forth “some evidence” to rebut the presumption that the insurer
has “suffered prejudice of its right to conduct a timely and adequate
investigation.” Erie Ins. Exch., 674 N.E.2d at 612. Once the alleged insured
does so, “the burden shifts back to the insurer to establish prejudice.” Ind.
Farmers, 917 N.E.2d at 1274.
[20] ASI’s Policy contained a specific provision regarding Stacy’s duty to promptly
notify the insurance company after a loss:
SECTION I – CONDITIONS
What Must Be Done After A Loss
In the event of a loss to which coverage may apply, the following
duties must be performed either by you, an “insured” seeking
coverage, or a representative of either:
1. Give immediate notice to us;
(Appellant’s App. Vol. III, p. 50). As the notice provision contained in the
Policy is clear and unambiguous, Stacy’s duty to ‘immediately notify’ ASI of
the loss is a condition precedent to ASI providing coverage under the Policy for
the damages arising from the purported negligent work performed by Greenwell
and UDI. Because the notice provision is a condition precedent to obtaining
coverage under the Policy, we must determine whether Stacy satisfied its duty
to “give immediate notice” to ASI. (Appellant’s App. Vol. III, p. 50).
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[21] To determine whether Stacy gave immediate notice of the loss to ASI, we
evaluate whether the notice was given within a reasonable time by considering
the purposes for which the notice was given and the circumstances of the
particular case. Sutton v. Littlepage, 669 N.E.2d 1019, 1023 (Ind. Ct. App.
1996); Employers Liab. Corp. v. Light, Heat, & Power Co., 63 N.E. 54, 56 (Ind. Ct.
App. 1902) (holding that “immediate” notice means “reasonable” notice). The
designated evidence reflects that on May 15, 2019, Greenwell’s backhoe
allegedly struck Stacy’s residence, resulting in damage to the foundation and a
crack in the residence’s exterior brick work. However, Stacy did not notice the
damage until six weeks later, around the end of June or the beginning of July.
At that point, she contacted Thompson, who surveyed the damage in
September 2019. After Stacy executed a Release, Greenwell contracted with
UDI to repair the damage to the exterior and foundation of the residence. It
was not until the day UDI finalized its repair work, on October 2, 2023,
approximately three months after the damage of the backhoe incident was
discovered and the damage had allegedly been rectified by UDI, that Stacy first
contacted ASI and notified the insurance company of the loss. Although the
temporal element of our analysis does not elevate this notice as being
unreasonable per se, combined with the surrounding circumstances of this
three-month time frame, we conclude that the notice was not given within a
reasonable time. Within these three months, the damage had been assessed by
Greenwell and a purported correction of these damages had been attempted by
UDI. Stacy only contacted ASI of the loss after UDI had completed its
rectification work and she became convinced that UDI had made the damage
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worse. Under these circumstances, we conclude that Stacy failed to give
reasonable notice to ASI. See Miller, 463 N.E.2d at 266 (court ordered summary
judgment to be entered in favor of the three insurance companies which
received notice of the accidents giving rise to liability one month, six months,
and seven months after their occurrence and which received notice of the
resulting lawsuits as early as five days after the suits were filed); See Askren Hub
States Pest Control Servs, Inc. v. Zurich Ins. Co., 721 N.E.2d 270, 278 (Ind. Ct. App.
1999) (“We believe that Askren’s delay of six months before notifying Zurich of
the ‘occurrence’ constitutes unreasonable notice.”).
[22] Even though Stacy did not give ASI reasonable notice of the loss, that failure
alone will not bar recovery under the Policy unless ASI suffered prejudice as a
result of the delay. See Miller, 463 N.E.2d at 265-66; see also Shelter, 615 N.E.2d
at 507. Although ASI must show actual prejudice from Stacy’s unreasonable
delay in providing notice about the loss, prejudice to ASI’s ability to prepare an
adequate defense can be presumed where, as here, there was an unreasonable
delay in notification. See Miller, 463 N.E.2d at 265. The presumption of
prejudice essentially means that if the delay in giving the required notice is
unreasonable, the injured party or the insured has the burden to produce
evidence that no actual prejudice occurred in the particular situation. See id. In
order to rebut this presumption that ASI could conduct nothing more than a
cursory investigation, Stacy points to her own designated statements,
deposition, and photographs of “the work done by Greenwell and [UDI].”
(Stacy’s Reply Br. p. 18). She also contends that other witnesses were available
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for depositions, and she alerts us to the report submitted by U.S. Forensics, the
expert retained by ASI to assess the damage.
[23] We conclude that Stacy failed to rebut the presumption of prejudice resulting
from her unreasonable delay. Stacy’s designated evidence does not address
ASI’s inability to view the temporary aspects of the original loss and the extent
to which each contractor contributed to the damage. At the time notice was
given, ASI was unable to evaluate the loss as UDI had already completely
altered the original damage, thereby preventing ASI from assessing the original
defects. “[T]imely notice gives the insurer an opportunity to investigate while
evidence is fresh, evaluate the claim, and participate in early settlement.” Tri-
Etch, Inc. v. Cincinnati Ins. Co., 909 N.E.2d 997, 1005 (Ind. 2009). Because ASI
was prevented from meaningfully investigating the claim due to the
unreasonably late notice, Stacy failed in rebutting the presumption of prejudice
in favor of ASI.
[24] In an effort to salvage part of her claim against ASI, Stacy requests this court to
characterize her loss as two separate damage events. In a single sentence in her
appellate brief and expounded on in her reply brief, Stacy now advances the
theory that “[t]he separate damage by [UDI] would qualify as a new/separate
occurrence under the Policy,” and as such, her notice of this loss would have
been reasonable as it was provided on the same day as UDI completed its
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work. 2 (Stacy’s Br. p. 16). However, throughout these proceedings, Stacy has
consistently maintained that Greenwell’s actions were the “efficient proximate
cause” 3 of the damage. (Appellant’s App. Vol. III, p. 166). She also
acknowledged numerous times that “[UDI] was hired by Greenwell to repair
the damage, and they made it worse.” (Appellant’s App. Vol. III, p. 161, see
also in similar wording at pp. 164-65, 166). Accordingly, without Greenwell’s
initial damage to the foundation and the exterior wall, there was no reason for
UDI to enter the fray and correct the loss caused by Greenwell. Without
having to decide as to whether the loss consisted of one or two occurrences,
Stacy only notified ASI on the day UDI completed its purported corrective
work of Greenwell’s instigated damages. This delay prevented ASI from
determining the exact and specific cause of the damage and the extent to which
each contractor contributed to the loss. In other words, Stacy’s delay in
notifying ASI resulted in ASI having to evaluate stale evidence. See Tri-Etch,
Inc., 909 N.E.2d at 1005 (“[T]imely notice gives the insurer an opportunity to
investigate while evidence is fresh[.]”).
2
While ASI claims that the argument of two occurrences was first made by Stacy on appeal, we disagree as
Stacy raised this as an alternative argument in her Response in Opposition to ASI’s motion for summary
judgment. See Appellant’s App. Vol. IV, p. 201.
3
The efficient proximate cause rule states that where a peril specifically insured against sets other causes into
motion which, in an unbroken sequence, produce the result for which recovery is sought, the loss is covered,
even though other events within the chain of causation are excluded from coverage. “Stated in another
fashion, where an insured risk itself sets into operation a chain of causation in which the last step may have
been an excepted risk, the excepted risk will not defeat recovery.” Hartford Cas. Ins. Co. v. Evansville
Vanderburgh Public Library, 860 N.E.2d 636, 646 (Ind. Ct. App. 2007).
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[25] Because there is no genuine issue of material fact that Stacy’s notice of the loss
to ASI was unreasonably late, we affirm the trial court’s entry of summary
judgment in favor of ASI on Stacy’s breach of contract claim. 4
III. UDI’s Denial of Summary Judgment
[26] In its interlocutory appeal, UDI contends that the trial court erred as a matter of
law in concluding that the HICA should govern the relationship between Stacy
and UDI instead of the foreseeability doctrine, as clarified by our Indiana
Supreme Court’s holding in U.S. Automatic Sprinkler Corporation v. Erie Insurance
Exchange, 204 N.E.3d 215 (Ind. 2023).
[27] Under long-standing Indiana law, a defendant is liable to a plaintiff for the tort
of negligence if (1) the defendant has a duty to conform its conduct to a
standard of care arising from its relationship with the plaintiff, (2) the defendant
failed to conform its conduct to that standard of care, and (3) an injury to the
plaintiff was proximately caused by the breach. Indianapolis-Marion Cnty. Pub.
Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722, 726 (Ind. 2010).
Construction negligence cases can generally be divided into two categories:
“cases where the plaintiffs seeking to recover in tort were in privity of contract
with the defendants and cases where they were not.” Id. at 734. It is
uncontested that Stacy and UDI were not in privity of contract; rather
4
Because we affirm the trial court’s entry of summary judgment in favor of ASI based on Stacy’s untimely
notice of the loss, we do not analyze Stacy’s claim that the execution of the Release only impacted ASI’s
subrogation rights against Greenwell and not against UDI.
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Greenwell contracted with UDI, with Stacy’s approval, to correct the perceived
damage caused to the residence by Greenwell. There is also no dispute that
Stacy only alleged property damage and did not complain of having been
personally injured.
[28] In U.S. Automatic Sprinkler Corporation v. Erie Insurance Exchange, 204 N.E.3d 215(Ind. 2013), our supreme court recently considered whether a duty was owed
when, like here, there was no privity of contract between the parties. The
supreme court observed that traditionally the acceptance rule, with its various
exceptions, “generally shielded” contractors “from third-party liability once the
work is completed and then accepted by the owner.” Id. at 225. In other
words, “‘contractors do not owe a duty of care to third parties after the owner
has accepted the work.”’ Peters v. Forster, 804 N.E.2d 736, 738 (Ind. 2004)
(quoting Blake v. Calumet Constr. Corp., 674 N.E.2d 167, 170 (Ind. 1996)).
However, the Automatic Sprinkler Court noted that in Peters it had abandoned
the acceptance rule in favor of the “foreseeability doctrine.” Automatic Sprinkler,
204 N.E.3d at 225. Specifically, in Peters, our supreme court held that,
A rule that provides that a builder or contractor is liable for injury
or damage to a third person as a result of the condition of the
work, even after completion of the work and acceptance by the
owner, where it was reasonably foreseeable that a third party
would be injured by such work due to the contractor’s
negligence, is consistent with traditional principles of negligence
upon which Indiana’s scheme of negligence law is based.
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Peters, 804 N.E.2d at 742. Continuing on the framework established in Peters,
the Supreme Court, in Automatic Sprinkler, “clarif[ied] the foreseeability
doctrine’s scope in two ways.” Automatic Sprinkler, 204 N.E.3d at 226. “First,
the foreseeability doctrine applies when a third party seeks recovery for personal
injury that was a foreseeable consequence of a contractor’s allegedly negligent
work.” Id. This harmonized the Peters decision’s goal of “equaliz[ing] the
liability field in the context of negligence claims resulting in injuries to third
parties.” Id. “Second, the doctrine applies when a third party seeks recovery
for property damage if personal injury—though not sustained—is a foreseeable
consequence of a contractor’s allegedly negligent work.” Id. This harmonized
the Citizen's Gas & Coke Util. v. Amer. Econ. Ins., 486 N.E.2d 998, 1000 (Ind.
1985) decision’s goal of maintaining the privity requirement’s operation to
preclude recovery for property damages in a negligence action, where the
negligent work poses a risk only to property and not persons. Automatic
Sprinkler, 204 N.E.3d at 226-27. However, when the contractor’s work
“possesses a risk to only property—not persons—the privity requirement
remains operative and precludes recovery for property damages in a negligence
case.” Id. at 227. In other words, the Court in Automatic Sprinkler granted two
avenues for third parties to recover against contractors: (1) seek recovery for a
personal injury caused by the contractor’s allegedly negligent work if the injury
was a foreseeable consequence of the allegedly negligent work, or (2) pursue a
claim for property damages against the contractor if personal injury was a
foreseeable consequence of the contractor’s allegedly negligent work.
Therefore, for a third party to recover for property damage under the
Court of Appeals of Indiana | Opinion 23A-CT-2529 | August 26, 2024 Page 19 of 26
foreseeability doctrine, “it must be ‘reasonably foreseeable’ that a third party
would be injured by such work.” Id. at 226 (quoting Peters, 804 N.E.2d at 742).
[29] Accordingly, in order for Stacy to recover for the damage to her residence in the
absence of any contractual or privity relationship with UDI, she must establish
that it was reasonably foreseeable Stacy would be injured by UDI’s perceived
defective work. In Automatic Sprinkler, our Supreme Court did not elaborate on
what constituted a ‘reasonably foreseeable’ personal injury. Since Automatic
Sprinkler was decided, Indiana courts have applied this new foreseeability
doctrine in two cases. In BMI Properties, LLC v. Daewong, LLC, 224 N.E.3d
1000,1005 (Ind. Ct. App. 2023), the subsequent owner of a mixed-use building
filed a complaint against the builder of the property, alleging that a bedpost fell
through the floor when a tenant was moving in, that bricks fell off the exterior
of the building and damaged a nearby car, that the brick veneer of the building
was peeling away allegedly due to design defects and improper drainage leading
to bricks falling to the ground, and that there were visible mold spores which
posed a health risk. Applying Automatic Sprinkler’s clarification of the
foreseeability rule, the BMI court concluded that even though no one became
injured when the bedpost broke through the floorboard, no one became ill due
to exposure to the airborne spores and/or black mold, and no passersby were
injured when the brick veneer peeled away from the building, whether personal
injury was a foreseeable consequence of these events amounted to a genuine
issue of material fact. Id. In Elpers Bros. Construction & Suppel, Inc. v. Smith, 230
N.E.3d 920, 931 (Ind. Ct. App. 2024), this court evaluated whether a duty was
Court of Appeals of Indiana | Opinion 23A-CT-2529 | August 26, 2024 Page 20 of 26
owed by a development company to a homeowner, when the parties were not
in privity of contract and where the homeowner had suffered only property
damage. Upon analysis, we found that it was undisputed that the development
company’s alleged negligence—its construction of other residences in the
subdivision contributed to the erosion and sediment buildup in the nearby lake,
which resulted in the homeowner’s malfunctioning geothermal heating and
cooling system—did not pose a reasonably foreseeable risk of personal injury to
the homeowner. Id. In light of these circumstances, we concluded that the
privity requirement set forth in Citizens Gas and Automatic Sprinkler controlled,
and the homeowner was therefore precluded from recovering property damages
from the development company. Id.[30] Turning now to the case at hand, we observe that due to the lack of privity
between Stacy and UDI, in order to recover for the perceived property damage
Stacy must establish that “personal injury—though not sustained—[was] a
foreseeable consequence of” UDI’s alleged negligent work. Automatic Sprinkler,
204 N.E.3d at 226. The evidence reflects that six weeks after Greenwell
completed its repair work at the residence, Stacy noticed a crack in the
residence’s exterior brick work. Unlike in BMI, the evidence does not reflect
the presence of any dislocated or fallen bricks. See BMI Properties, LLC, 224
N.E.3d at 1005. Although the original damage was discovered sometime early
July, UDI’s repairs did not commence until late September and were completed
on October 2. There is no evidence that during this time the damage to the
residence worsened or Stacy felt unsafe to remain in the home. Through her
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designated evidence and in her appellate brief, Stacy now contends that she
presented “substantial evidence demonstrating” that UDI’s work did not meet
industry standards and “directly resulted in significant property damage.”
(Appellant’s Reply Br. p. 14). She claimed that UDI’s negligence “violated the
standard practices for foundation stabilization and directly led to the observed
property damage.” (Appellant’s Reply Br. p. 14). Stacy contended that the
piering system to rectify the foundation problem required pouring new concrete
footers and driving steel piers into bedrock. However, Stacy did not designate
any evidence, nor can we find any, establishing that personal injuries might
have been a reasonably foreseeable result from UDI’s perceived negligent work.
To the contrary, Howard Byrd (Byrd), UDI’s employee who inspected Stacy’s
property before and after UDI performed the work, affirmed that UDI’s system
did not require pouring new concrete footings, rather the piers installed by UDI
“were pressed into the ground until they reached load bearing strata.”
(Appellant’s App. Vol. IV, p. 161). Byrd also noted that, when he inspected the
property on October 10, 2022, after UDI’s work had been completed, he did not
see any new cracks in the mortar joints where UDI had made repairs.
Similarly, neither Lee’s report nor Mark Ricketts, 5 Stacy’s expert, found
incorrectly installed resistance piers but rather only noted cosmetic repairs to
the residence. At no point during these corrective repairs was Stacy ever
advised that she needed to vacate the residence because it was unsafe.
5
We note that Mark Ricketts’ report also depicts certain cracks in bricks and concrete that are not in the area
of the repairs completed by UDI and therefore are not defects that UDI was employed to remedy.
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Although Stacy points to a statement from UDI acknowledging that its work
could physically injure Stacy or her dwelling, the statement was made as a
caution to the homeowner “not to fall in the holes that [UDI] digs” for the
footings, it does not amount to a recognition that personal injury was a
reasonably foreseeable consequence of the work. (Appellant’s App. Vol. VI, p.
121). Based on these circumstances, we do not find any genuine issues of
material fact establishing that the alleged negligent workmanship carried with it
a reasonable foreseeability of personal injury. See Automatic Sprinkler, 204
N.E.3d at 226. Therefore, the privity requirement controls, and Stacy is
precluded from recovering her property damages. See id.
[31] Trying to avoid the application of our Supreme Court’s holding in Automatic
Sprinkler, Stacy contends that the lack of contract between herself and UDI
constituted a violation of the HICA. Relying on Indiana Code section 24-5-11-
10, which requires that “[a] real property improvement supplier shall provide a
completed real property improvement contract to the consumer before it is
signed by the consumer,” Stacy argues that UDI, as a real property
improvement supplier under I.C. § 24-5-11-6, should have contracted directly
with her, as a consumer pursuant to I.C. § 24-5-11-2, and not with Greenwell.
She maintains that UDI’s failure to comply with these statutory requirements
“exposes [UDI] to liability for failing to meet statutory obligations.” (Stacy’s
Reply Br. p. 11).
[32] While we agree with Stacy that public policy strongly favors the enforcement of
consumer protection statutes to ensure that homeowners are safeguarded
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against deceptive practices and poor workmanship, Stacy’s argument in essence
amounts to the abrogation of the well-known adage that Indiana courts
recognize the freedom of parties to enter into contracts and presume that
contracts represent the freely bargained agreement of the parties. Fresh Cut, Inc.
v. Fazli, 650 N.E.2d 1126, 1129 (Ind. 1996).
[33] The reality before us acknowledges that Greenwell and UDI contracted for the
benefit of Stacy. The contract between Greenwell and UDI was not a “real
property improvement contract” because it was not entered into between a
“consumer” and a “real property improvement supplier.” I.C. § 24-5-11-4.
Therefore, the HICA did not apply to UDI for the purpose of its transaction
with Greenwell. Moreover, Stacy consented to Greenwell entering into an
“agreement to allow [UDI] to fix the foundation.” (Appellant’s App. Vol. IV,
p. 85). Stacy and Greenwell negotiated the Release, which directly contributed
to Greenwell entering into a contract with UDI to correct Greenwell’s alleged
damages. In the provisions of the Release, Stacy acknowledged that “[t]he
customer accepts that by Greenwell paying [UDI] for quoted repairs due to
damage caused during service on 05/15/2019 in the amount of $4,800.00 that
this claim will be satisfied and closed.” (Appellant’s App. III, p. 158). Instead
of negotiating with Greenwell to pay her a lump sum and then contracting
directly with the provider of the repairs, Stacy voluntarily elected to permit
Greenwell to coordinate and pay for the foundation repairs. To that end,
Greenwell entered into a contract with UDI. It is only after the Release was
executed and the repairs made that Stacy complained of the contractual
Court of Appeals of Indiana | Opinion 23A-CT-2529 | August 26, 2024 Page 24 of 26
structure that she freely negotiated and agreed upon. While we agree that
HICA’s intent is to protect consumers from substandard and deceptive practices
in home improvement transactions, Stacy has not designated any evidence
supporting the allegation that the agreed upon contractual framework
intentionally allowed “UDI to bypass the protections afforded by HICA” to
Stacy. (Stacy’s Reply Br. p. 11).
[34] Accordingly, based on the designated evidence before us, we conclude that UDI
did not owe a duty to Stacy because the parties were not in privity of contract
and personal injury was not reasonably foreseeable to result from the alleged
acts of negligence. Therefore, as there are no genuine issues of material fact,
UDI is entitled to summary judgment as a matter of law. We reverse the trial
court’s denial of UDI’s motion for summary judgment. 6
CONCLUSION
[35] Based on the foregoing, we hold that no genuine issue of material fact exists
that Stacy failed to timely notify ASI of the damage resulting from UDI’s
workmanship. However, because we hold that no privity of contract exists
between Stacy and UDI and personal injury was not reasonably foreseeable to
6
Because we find UDI’s privity of contract argument determinative of the cause before us, we will not
address UDI’s alternative arguments with respect to the application of the economic loss doctrine and with
respect to waiver of claims for property damage pursuant to the exculpatory clause in UDI’s contract with
Greenwell.
Court of Appeals of Indiana | Opinion 23A-CT-2529 | August 26, 2024 Page 25 of 26
result from the alleged acts of negligence, we reverse the trial court's denial of
UDI’s motion for summary judgment and enter summary judgment for UDI.
[36] Affirmed in part and reversed in part.
Kenworthy, J. and Felix, J. concur
ATTORNEY FOR APPELLANT
William D.Beyers
Buchanan & Bruggenschmidt, PC
Zionsville, Indiana
ATTORNEYS FOR APPELLEES
William J. Beggs
Ryan M. Heeb
Bunger & Robertson
Bloomington, Indiana
Eric C. McNamar
Edmund L. Abel
Lewis Wagner, LLP
Indianapolis, Indiana
Court of Appeals of Indiana | Opinion 23A-CT-2529 | August 26, 2024 Page 26 of 26